Idaho County free press. [volume] (Grangeville, Idaho Territory) 1886-current, 1887-03-11
EXCHANGE LINGO.
The Meaning of Puts, Calls spreads,
straddIes and similar Terms.

w lldt are puto' S'i'S' SPASS
and 'straddles'p" asked a reporter.
.'Well," said John f. Mccain, the
confidential clerk of Russell Sage, OF
whom the question was asked. 'Fll tell
you if you will promise never to men
ton the poetical subject again. 1t re-
quires pretty deft wording to make the
thing clear, so it is not an exh laratlng
subject 10 talk on. You hear good
deal about puts and calls, but ]
venture to say that there are $4,000, OOc
people in the United States who do not
know what they mean, nor what the
Needing is of the privileges. Now.
privilege is a contract by which the
maker of it, Russell Sage, S. V. White,
Jay Gould or Harvey Kennedy, en-
cages to purchase from the holder in
the one case. or to sell to the holder in
the other case, number of shares of
some specified stock at a certain price
at any time within the option of the
holder. Got that?
"A cali is privilege bought of the
maker, at a certain price, and the
owner of 1T is privileged to call for
X
price, within thirty, sixty or ninety
days, four or six months. If man
holds put he has the right to deliver
to the maker of the privilege stock at
Ger ain agreed price within certain
number of days. Clear? No? Well,
let's try once more.
Suppose Western Union is selling at
20. A man wants a sixty-day put on
it at sc, because he believes the stock is
going down. He gives Mr.. Sage. MIR.
White, Mr. Kennedy or Mr.. Gould per
cent on the amount of stock he wants
to deal in A hundred shares is usual,
and | per cent is 800. He receives in
return a slip of paper signed by either
one or the other of these gentlemen.
Then if Western Union goes below 66
within sixty days he may buy it for
whatever it is selling for below that
price, and put it to the maker of the
privilege at the price agreed on-66-
and receives check for So, 600. The
holder makes the difference. All, you
understand? If Telegraph does not go
below &c the holder is out his 800 The
call bus ness operates exactly in the
opposite way. A man buys the priv
ilege of calling Western Union at "a
when it is selling at 20. If it sells
above Is YOU can call on the maker OF
the privilege for a hundred shares al
IS. and the hundred shares are thus
bought by the holder for 81, 800, and he
turns around and sells it at 80 if the
stock is selling there, and pockets thu
difference.
'What about spreads and strad
dles?'"
"A 'straddle' is put and call
combined The holder of one may put
stock to the maker of the privilege o
call for it. 'Straddles come high, be
cause there is money in them whicheve
way the market may 60 if the marke
does not 90 at all, but stands st IL, VIII,
the maker is in the money he has beer
paid for the privilege, usually about
per cent or $500. A spread is a'so
put and cali combined, but there
| this difference; 'straddle' Is made a
, the market. That is to say, the make
of the privilege takes the risk that tn
, stock in question does not move to an
t extent from the price at which it is sci
e ing when the privilege is sold. In
spread the maker has more leeway
If Western Union is selling at 20, to 9
back to the old illustration, the make
of the priv lege sells a spread, say ;
67 and 80. If it goes below 81 I'll
holder can put the stock and make til
difference, if it goes above s
the holder can call at tn;
p pr ce and reap the ;profit
But so long as the price of the stoc
8 keeps within those pc nts the maker {
= the privilege is safe. To put it i'll al
= other way, the holder of 'straddle' wi
G make if the market for the stock he
+ deal NO IN moves at all. The holder {
a a spread doesn't make any tn ng unit
g the market moves past certain limit
There is one thing more; the maker
II a privilege only receives the money fC
II which he sells the privilege, while II
s holder may make thousands-or not
: ing.
IS The mention of puts and calls r
= calls perforce the exciting times tW
II years 900 last spring. when the mark
g went Gown with rush and the holde
IS of puts issued by Mr.. Sage invested h
d Office like an army, After the aboN
explanation it will be seen that the
n privilege of putting stock to Mr.. Sag
If was exceedingly valuable. The
} privileges were so many contrac
is whereby Mr.. Sage agreed to take the'
t. stocks at price which was consderab
is above the market price. During fly
d days Mr.. SAGE paid out what few me
d in New Yoi k were probably able to pa
II out about ~. 000,0 in solid cash. I
'e kept on deposit then, and he does nov
o $1,000, 900 in available money at IL
e Importers and Traders Bank. Sn'
III that excitement the probability is tn
he Mr. Sage has drawn out of this vel
he business on puts and calls mo
,e money than he then pad out. A gre
g. deal OF the stock certificates which we
n then put to him he held and realiz
If when the market advanced. ~
ii MAIL
lie Circumstances Alter Gases.
L Al